What Kung Fu Can Teach Us About Investing

Did you watch Kung Fu with David Carradine back in the 70's? We'll get back that question in a minute. 

I saw a blog post about building a portfolio anchored around a minimum volatility fund. I built the following portfolio on Portfoliovisualizer;

 

Here are the results;

 

Portfolio 1 may or may not be optimal but it is at a minimum, valid. It looked a lot like 60/40 as far back as the data goes and then went down much less in 2022. Portfolio 1 outperformed in 8 years and lagged in 3 full years and is lagging to start 2023. 

All of that seems fine but in 2020, Portfolio 1 lagged behind VBAIX by 10.03 percentage points gaining 5.38% versus a lift of 16.41% for VBAIX. Does lagging by that much in one year now invalidate the portfolio? I would say no. That's not even a good question IMO. But, imagine you worked on this in 2019 and determined that Portfolio 1 was the optimal portfolio for you and then, the first year out of the blocks you get left behind by double digits. In that scenario, would you bail? That's a tough question to answer. 

Back to Kung Fu. I feel like Master Po or Master Khan would have something to say about the patience needed to build a valid portfolio and stick with it for the times where it struggles. No portfolio can always be the best performer but it can still best for your long term objective. 

A quick bit about healthspan. As opposed to lifespan, healthspan is the age to which you're still able-bodied enough to do what you enjoy doing. The picture is of Charles Eugster who was 93 when that picture was taken. Eating right and lifting weights are the simplest ways to maintain healthspan. Some people will naturally have good luck on this front but I've never been willing to bet that would be the case for me without putting in the work. 

Two weeks ago I passed my pack test for the 21st time ensuring I can fight wildfires in the upcoming season. The pack test calls for a three mile hike on a track, wearing a 45 pound pack in 45 minutes or less. Pack testing is neither fun nor easy. For now, I think I am still a no-doubter. I took about a minute off my time this year versus last by changing tactics. I used to do the first lap or two at a pace I knew was unsustainable but gave a margin of error if something went wrong. This year, I didn't do that, I just started walking relatively fast and I think I maintained the same pace +/- a couple of seconds for each of the 12 laps. 

I love fighting wildfires. I hope to be able to do it until I'm holy shit, how old is that dude? That means remaining capable of pack testing. We have always had firefighters, including this year, in their 60's pass. This year, one of our guys who I'm pretty sure turns 70 this year passed it. Mr. Backhoe, my former neighbor, passed it at 75. Truly elite. At the other end of the spectrum, we've had guys in their 20's unable to pass. 

Volunteer firefighting checks off just about all of the retirement lifestyle boxes that we talk about here. There is the need to stay fit to be able to engage fully (departments back east with no wildland component might do things differently). Being part of the success of the fire department provides purpose in life. There are problems to solve, challenges to be overcome and social interaction within the group that is not just idle chit-chat. You are providing a service to the community. With the right effort you can monetize it by doing incident management team (IMT) work (not sure if this is available to departments back east). 

If you love something as much as I love being a volunteer firefighter then I have to believe you'd prefer to be able to do your thing as long as possible. What sort of work do you have to do to be able to do your thing for a very long time? What are the benefits that go along with that work? Here I'm thinking, better stamina, fewer or maybe no medications, not having middle aged/early senior citizen pain, saving money because of those things and not spending more than an hour a year at the doctor, just going for an annual. 

I didn't understand the importance of these things when I first joined the department 20 years ago so maybe I just lucked out. Part of getting older is the realization that any thing can happen to any one at any time, that's an output and we have no control over outputs but we can control the inputs and give ourselves the best chance for a successful outcome.